Euro zone: It is not surprising that service inflation remains high

The rise in manufactured goods prices is becoming small , as a result of the fall in the prices of energy and industrial metals, and the fact that industry in the euro zone is now in a situation of insufficient demand. But the rise in service prices remains strong in the euro zone, which is also unsurprising , given the sharp rise in unit labour costs, the weak foreign competition on average in the service sectors, and a persistent regime of excess demand and insufficient supply. Services account for 59% of household consumption. Even if the rise in industrial products falls to 0%, since service prices are rising steadily by around 4% a year in the euro zone, this results in incompressible core inflation of around 2.4%, which will pose a problem for the ECB.